Money. Banks. Currency. Stocks. Theories. Capitalism. Communism.
But, when one mentions the word 'economics,' several different words come
to mind. However, economics is a term relating to far more than mere monetary
issues.
A textbook definition of 'economics' is "the study of efficient
allocations of scarce resources."
Everything relates to economics. How and where you spend your time,
money, and energy can be graphed and thought of rationally.
Take, for example, a simple t-shirt.
You can choose to purchase the shirt, exchange some sort of good or
service for the shirt or you can make it yourself. Generally, you would not
want to make a t-shirt yourself, as you would spending far too much time and
energy on one measly item of clothing.
Then, you consider your options carefully, looking at where you can
obtain t-shirts. Taste and preference come into play, as well as product
differentiation and price. Many producers sell t-shirts on this planet.
However, you may not want to travel around the globe to find a t-shirt. So,
you are far more likely to purchase a shirt available locally than one you
have never seen before in a far off land.
Once you decide that you want to make a t-shirt purchase in a certain
area, you figure out how much money you are willing to spend on it. If you
are on the frugal end of the spectrum, discount retailers and thrift stores
may appeal to you. However, if name brands rock your world, high-end
retailers may seem more intriguing.
Let's assume that you don't want to spend too much money on a shirt.
Then, you look at likely retailers, examining their selections, sizes,
colors, materials, etc., finally stumbling upon several decent
possibilities.
In our hypothetical situation, let's go a step further, imagining that,
after you purchase a cotton t-shirt, you see a news story about the plight of
cotton pickers in Egypt. A wave of guilt washes over you. Suddenly, you
re-think your purchase. Your next t-shirt is less likely to be made of
cotton.
Now that you've made your decision, let's understand the underlying
mechanics. Your total demand for a t-shirt decreases as the availability of
t-shirts increases. You can only wear so many t-shirts at once. The price
would decrease with the amount of t-shirt available in the market. As you
become more willing to pay more for a t-shirt, the choice of t-shirts you
have at your disposal increases.
Economics combines life with reason, encompassing areas that are not
directly money-related.
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